‘Why venture capital, local private equity must be promoted’
Stakeholders have stressed the need to promote venture capital and private equity firms to attract more Nigerians into the business and reduce the rising unemployment rate.
Venture capital is a type of funding for a new or growing business, that usually comes from venture capitalists, who specialise in building high risk financial portfolios.
With venture capital, the venture capitalist gives funding to the start-up company in exchange for equity stake in it.
Indeed, the primary advantage of venture capital financing is an ability for expansion that would not be possible through bank loans or other methods.
This is essential for start-ups with limited operating histories and high upfront costs.
Many entrepreneurs have great ideas, but struggle to bring them to fruition due to a lack of funding.
The experts who spoke at the Most Influential People of African Decent (MIPAD), Nigerian edition, in Lagos, at the weekend, agreed Nigeria needs more venture capital fund to support small businesses that have significant growth potentials.
According to them, businesses that are fit for venture capital are companies that have significant growth potential and are in situations in which they would need funding over and above what could be typically funded out of personal resources.
They noted that in most instances, they are companies that are not bankable, in other words, they could not go to a bank and get a loan because they have no assets to back up the loan.
The Chief Executive Officer of Venture Garden Group, Nigeria, Bunmi Akinyemiju, in an interview with The Guardian, said most of the successful economies of the world took a lot of bet in early stage companies.
“The U.S. defense, military are the ones that took a lot of bet in early stage companies. Israeli military invested heavily on start-ups. If you look at some of these countries that are quite successful, there is a major role that the regulator and government played to develop this investment segment.
“We have to realise that we need venture capital to support young people’s idea. We need to capture the story of people who have made money by investing early through venture capitals because venture capital is all about investing early in a particular idea that turns into profit. A lot of people have actually made money through venture capital financing.
“There is CBN intervention in agriculture, aviation and power. What happens to technology- innovations and fintech? What type of intervention are you doing for these sectors?
“If they mandate banks to invest one per cent of their profit in small fintech companies, that would trigger innovations. We have to bring innovative thinking as opposed to only thinking about loans, 25 per cent interest and so on.”
The Chief Executive Officer of Enyo Retail and Supply, Abayomi Awobokun, said there is need to create more awareness on the existence of venture capital in Nigeria to help grow the SMEs and boost the economy.
“A lot of people do not know that venture capitals do exists, so more people have to talk about venture capitalists and their activities.
“Again for these start-ups, management is still young in the job. More so, in the area of governance, these startups need to get a board , get people on board who can guide the management,” he said.
The Chairman of NASD Plc, Olutola Mobolurin, at a recent forum in Lagos, stated that the local private equity and venture capital must be promoted to attract more Nigerians into the business net.
He said: “Growth comes from investment and investment from savings; foreign investors are tapping from the savings of other people. We must initiate policies that encourage savings and woo Nigerians in Diaspora to bring their money and save in Nigeria.
“A lot of Nigerians’ savings are abroad. We must encourage domestic investment, if we do that, people that have money outside will bring it back home.
“We need venture capital fund to get more Nigerians into business. When there is no capital and institutional framework, it would be difficult for Nigerians in Diaspora to invest in the country,” he said.
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